What is the CAC 40?
The name ‘CAC 40’ is in fact an abbreviation of its full name ‘Cotation Assistée en Continue’ and the number 40 represents the forty companies that are quoted. It is the major economical indicator of the French market and is quoted on the Euronext Paris stock exchange. This index therefore takes into account the share quotations for 40 of the largest French companies.
More precisely, the CAC 40 Index is calculated from the share price results of the 40 largest and best performing French companies, extracted from the 100 largest companies quoted on the Paris Euronext stock market. A committee of experts is responsible for the selection of these businesses according to various criteria including company size, stock market capitalisation, and their representation of their activity sector as compared to national data.
We can therefore fairly easily understand that when the shares of companies quoted on the CAC 40 move in a certain direction, the quote for the index itself tends also to follow this trend, whether it is rising or falling. But the ratio afforded to each business and therefore its importance in the calculation of the Paris index rate varies according to the influence of each business in the country’s economy.
The quotation of the CAC 40 index is revised every 15 seconds as it is what is called a ‘continuous quote’. It is possible to follow the movements of this index price from Monday to Friday, from 9 a.m. to 5.30 p.m., which are the opening hours of the Euronext market.
It should be noted here that the Paris Euronext stock exchange is the official market for the French business assets, but it is also part of the NYSE Euronext market which is the major stock market group worldwide.
Composition and calculation of the CAC 40
As we saw above, the CAC 40 is composed of the assets of 40 French companies. Its calculation therefore relies on a weighting of these titles. Of course, all the companies priced do not have the same weight in the calculation of the final index and each one of them is associated to a specific coefficient according to its exchanged volume and thereby its importance compared to the others.
The CAC 40 index calculation is revised every 15 seconds according to the movements of all the titles represented in real time. The market that reports this quotation is open from Monday to Friday, from 9am to 5.30pm. It is therefore only from 9am that the index takes into account all the orders passed before this time. The market opening therefore generally presents more marked movements than during the remainder of the day.
Where to find the quote for the Paris Stock Market?
It is nowadays fairly easy to consult the quote for the Paris Stock Market. There are several ways to do this. In particular, you can subscribe to a financial review that will give you the new quotes every day, and note events observed over the last 24 hours, or you can consult certain specialised websites that offer the same information.
Unfortunately, in these two cases, it is not always possible to follow the quote of this stock exchange in real time and therefore seize the best opportunities.
Quotes from the Paris Stock Market in real time through brokers:
To always keep an eye on the Paris stock market and follow quotes in real time, wherever you are, the best way is to subscribe to a broker that offers this service free of charge, ideally enabling you to access this quote from a smartphone, computer or tablet at any time.
What are the external elements and factors which influence the CAC 40 prices?
To understand how the price of the CAC 40 index is fixed, it is logically necessary to be interested in the French economic activity as a whole. So, all political, financial and economic important information about France is to be taken into account.
The principal influential elements relate in a direct way to the economy such as the GDP calculation, the ratings agencies evaluations, the employment and unemployment figures and the general results of the various industrial branches.
The more experienced traders will be able to venture into cross-examining information emanating from the various companies priced in this index but the calculation of these trends remains extremely long and complicated and is therefore not appropriate for beginner investors.
However, the majority of the Forex trading platforms place at the disposal of their users some charts reporting the more or less recent price movements which make it possible to easily complete a technical analysis and thereby to predict certain trends or movements. It is however recommended to take into account at the same time this data and that of more psychological orders and that related to current events, to detect the “announcement effects” in advance.
As you have undoubtedly understood, the CAC 40 is particularly representative of the French economy. Therefore the indicators to follow, apart from the technical analysis, are as follows:
- The overall French economic results (GDP, trade balance, related indices…)
- The results and innovations of the businesses quoted (turnover, capitalisation, profits, investments...)
- The major policy decisions that could directly impact the productivity of these businesses (fiscal reforms, assistance, employment…)
To summarise, when you establish your trading strategy you should take into account all the environmental indicators together with the market trends.